Q3 2020 Helius Medical Technologies Inc Earnings Call
Please standby.
Good evening, ladies and gentlemen, and welcome to the third quarter fiscal year Twentytwenty.
<unk> earnings conference call for Helios Medical technologies.
At this time, all participants have been placed in a listen only mode.
Please note that this conference call is being recorded and that the recording will be available on the company's website for replay shortly.
Before we begin I would like to remind everyone that all right.
X. and responses to your questions today may contain forward looking statements that are based on the current expectations of management.
These forward looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated.
Including those identified in the risk factor section.
More of our most recent annual report on form 10-K, and quarterly report on form 10-Q.
Factors may be updated from time to time in our filings and other and our other filings with the FCC.
Which are available on our web site.
All statements made during this call.
And as far as of November 12 Twentytwenty.
We undertake no obligation to publicly update or revise our forward looking statements as a result of new information future events or otherwise except as required by law.
I would now like to turn the call over to Mr. Dane entries Helios Medicals interim president.
And Chief Executive Officer. Please go ahead Sir.
Great.
Thank you, operator, and Hello, and welcome everyone to Heelys Medicals third quarter.
2020 earnings Conference call I'm joined on the call. This evening by choice Labite Count, our Chief Financial Officer, and Chief operating Officer.
And Mark Dino, our Vice President and general manager of our Canadian operations.
Let me provide you with a quick agenda of what we're going to focus on today as part of our strategy to reposition the company to create intermediate and long term shareholder value first as the recently appointed President and.
You know appeal, yes, I'll begin my remarks with a brief introduction.
I'll, then discuss our U.S regulatory strategy and progress we have made in recent months. Following this discussion I'll hand, it off to Mark who will provide you with an update on our commercial activities in Canada choice.
Joyce will then briefly.
Thank you our third quarter financial results as well as the recent progress we have made to secure additional capital and enhance our balance sheet condition.
Following Joyce's remarks, I'll conclude with some thoughts on our near term and longer term outlook before we open the call for questions.
Before delving delving in to the.
No update for the quarter I'd like to take a moment to just introduce myself provide a few summary points on my background and ship share where I focus my time since joining the executive leadership team.
Joining heelys medical with over 30 years of experience in <unk> in the financial industry. The majority of my career has.
With meaningfully partners, a hedge fund value based hedge fund that I found it in 1996 and subsequently grew to over 2 billion in assets under management.
Also held board of director positions for multiple companies in the medical device and Medtech sub sector, including here at Heelys medical three.
Three years ago I joined the board of directors at Heelys after conducting my diligence because I was fascinated by the ponds technology and the opportunities in store for this organization.
With its potential to improve the lives of patients with chronic neurological conditions by empowering the natural healing processes.
Of the brain I believe I believe the ponds device and treatment and ultimately healios is uniquely positioned to address one of the last frontier is in health care.
As the interim president and CEO and committed to reposition the company for our next stage of growth with the goal.
Building on our recent achievements in Canada, and the us for benefit of our customers and patients.
And to driving continued operational progress as efficiently as possible to create value for our shareholders.
As.
Pursues the next stage of growth.
The organization I also intend to stand alongside my fellow employees and shareholders Importantly, I've taken steps to further align my personal financial interest with the shareholders of Heelys Medical most recently I participated in the Companys private placement in October were expanded my beneficial ownership.
And then the company to approximately approximately 6.3% of the shares outstanding.
Also elected to receive no compensation when accepting the role of interim President and CEO.
Since joining the executive leadership team in late August I've focused on evaluating every aspect of our strategy.
By meeting with employees customers shareholders and patients to obtain their feedback.
In my interactions with employees I've been continually impressed by their level of expertise as well as their commitment and drive toward fulfilling our mission to help patients suffering from chronic neurological condition.
Ultimately I believe our most undervalued asset it truly is our team of experienced employees, who hold the key to our future successes in creating shareholder value.
Importantly, my discussions with our customers and patients at further convince me of the tremendous potential of the ponds treatment.
I believe we're at an important inflection point in the company's history as we seek regulatory approval to bring this revolutionary technology to the U.S. market.
With that as a backdrop, let me now provide you with update on our us regulatory strategy and related progress earlier this year our regular.
Victoria and clinic clinical team made the strategic decision to prioritize an indication in multiple sclerosis, or an s. as the pathway for obtaining the first clearance for our ponds device. This.
This strategy was based on multiple factors, including the strength of our existing data and real world evidence the size of the <unk>.
Jurisdiction of Dms patient population in the us and most importantly, the high unmet medical need that mess represents.
Our team set their sights on this regulatory pathway with a goal of submitting a request for de Novo classification and clearance in the second half of 2012 their pace.
Care progress towards our regulatory strategy has been especially notable given the onset of the COVID-19 pandemic and the challenging operating environment that has caused this year.
Diligent preparation, we submitted our request for de Novo classification and clearance of the pond.
Subs device on August 4th of this year with an indication for the treatment of gate deficit due to symptoms from SMS to be used as an adjunct to a supervised therapeutic exercise program in patients over 18 years of age during.
During the remaining weeks of the third quarter were pleased to see our submission move.
On the administration.
Administrative review phrase into the substantial review phase as a reminder, the FDA stated goal is to provide a decision within a 150 days or 60% of de Novo requests that are words that are submitted in 2012.
On October 19th.
Approximately 75 days into the review process, we announced the receipt of a request for additional information from the FDA.
Specifically the FDA requested additional analysis of clinical data and proposed certain Lilly.
No modifications are regulars Tory affairs team is focused on preparing a formal response to this request as it as efficiently and thoroughly as a.
Thoroughly as possible to enable the FDA to resume its review of our submission over the last three weeks they have been conducting.
An analysis of each aspect of the request with the goal of precisely aligning our response to address the information the FDA has requested.
We've made significant progress in the analysis.
The Fdas request for information in a short period of time.
During.
The remaining months of 2020, we will continue this effort and focus on preparing our response to the FDA request with the goal of submitting it during the first half to 2021 importantly, we believe our breakthrough designations status will allow us to work efficiently with the FDA as we address.
Dresser request and plan our formal response once we submit our response to the FDA, we expect that the FDA review clock will resume and that the agency will strive to achieve its a 150 day goal. We look forward to facilitating the FDA review of our submission into.
Or by providing additional details on our planned commercial strategy as we draw closer to obtaining regulatory clearance. In addition to our recent progress on the regulatory front I'm also pleased to share that on November 2nd the centers for Medicare and Medicaid services completed the color.
Selection of public comments on a proposed rule regarding Medicare coverage of innovative technology for FDA designated breakthrough medical devices, a formal decision regarding the proposed rule has not been made but if it if it were to be finalized as drafted our ponds device would.
The eligible to receive national medical care Medicare coverage on the same day as it receives FDA clearance.
This would then last for up to four years and provide us with a boost in our us commercialization efforts.
Mark we know well now provides.
Survived you with a review of our third quarter revenue performance and an update on our commercial activities and can't Mark.
Well, thanks, very much and good evening everyone.
For the third quarter, we reported total revenue of $131000 compared to 150000.
Dollars in Q3 of last year.
Our revenue in both periods was driven by sales to the neuro syrupy clinics in Canada that have been authorized to provide our ponds treatment.
Our third quarter sales performance contributed continued to be impacted by the significant business disruption.
That is being experienced here in Canada as a result of the COVID-19 pandemic.
I'll take a moment now just to provide you with some updates on the business trends, we've been seeing during the quarter and in recent months.
Entering the third quarter, we were pleased to see that almost all of our ponds authorized clinics had reopened.
And to outside non emergency patients the remaining clinics opened in July.
Despite this positive trend the clinics continued to be constrained by the the effects of the pandemic and the protocols implemented to ensure patient health and safety.
Okay.
First and foremost the clinics continued to be impacted by federal and provincial requirements that limit their capacity to approximately 50% of normal services.
In addition to these formal restrictions we.
We believe the clinic capacity and productivity was significantly lower during the third.
Quarter due to a couple of factors.
The impact of clinics specific protocols that have been implemented to ensure social distancing and.
The impact of coated on patient willingness to seek including treatment specifically, it's important to note that multiple sclerosis patients often take.
Disease, modifying medications, which can suppress the immune systems and this potentially could increase the risk of being infected with cobot. So therefore as a result of these factors we estimated on our earnings call in August that the average clinic across our network was currently operating at about 30% of.
Their normal capacity.
In this challenging environment, we focused our efforts on expanding access to ponds treatment by building, a broad foundation and positioning us to drive strong growth once the situation begins to normalize.
So as a result, we began 2020 with an.
And enhance commercial strategy to drive three things awareness credibility and access to our ponds treatment in Canada as a part of this strategy. We are focused on expanding our network of ponds clinics in the most densely populated areas of Canada by authorizing clinics that fit our targeting criteria.
First and foremost.
Most.
Established clinical excellence and a commercial focus on neuro rehabilitation.
Two existing referral networks with hospital systems, and three reimbursement expertise and establish payer relationships for the treatment of neurological conditions, specifically MMS and.
Majdic brain injury.
Given the onset of cold, we quickly began engaging with potential new clinics by a virtual means.
In recent months our team also developed a virtual authorization and training process.
A series of live online modules to provide ponds training to the therapist's.
Our shift to a virtual engagement training an authorization along with the dedicated efforts of our commercial team has enabled us to continue to expand our clinic network at a strong pace and we intend you intend to continue the virtual engagement strategy going forward.
You may recall that we began the year with seven ponds authorized clinical.
Locations, which we quickly doubled to 14 locations in March and despite the cobot related disruption I'm pleased to report we now have a total of 27 authorize clinic locations. That's nearly a four fold increase in our clinic network in less than a year.
Looking ahead, we expect.
The federal and provincial capacity restrictions will remain in place for the foreseeable future as the recovery in Canada continues to.
Be a dynamic situation.
While restrictions varied by region clinics continued be restricted to approximately 50% of their normal capacity as a result of these federal and provincial.
Actual restrictions importantly, we believe that their productivity remains below this level due to additional cobot related factors. For example, as I mentioned clinics continue to cite issues with pace and patient willingness to seek treatment, particularly those for uncoated represents a higher risk due to their age and any existing health.
Conditions further impacting the clinics productivity.
While the environment remains in the early stages of recovery, we will continue to focus heavily on finding bedding and onboarding highly skilled neural therapy clinics in key geographic areas.
With the goal of increasing our clinic network to a total of 30 clinic.
<unk> patients by the year end.
As we head into 2021, and our recently authorized clinics work through their initial patient treatments.
We believe this expanded clinic network will position us well for the future by helping us to increase the pace of adoption of our ponds treatment here in Canada once the effects of the Cobot night.
Glenn Pandemics aside subside.
So with that please let me turn it over to choice for a brief review of our Q3 financial results choice.
Thanks, So much mark and good evening, everyone since Mark covered our revenue results I'll begin my remarks by continuing down the TNL our gross profit for the.
Third quarter of 2020 increased by 48000 or 79% year over year to $109000 due to a temporary reduction in manufacturing activity in the current quarter, primarily resulting from resource availability.
Operating expenses for the third quarter of 2020 decreased by $2 million.
For 35% year over year to $3.8 million, reflecting the continuing the continued benefits of the cost reduction initiatives that we have implemented during the past year.
Operating loss for the third quarter, 2020, with $3.7 million compared to $5.7 million for the prior year period.
Lastly.
We reported net loss for the third quarter of 2000 $23.5 million or minus eight cents per basic and diluted common share compared to a net loss of $5.6 million or 22 cents per basic and diluted common share for the same period last year.
Turning to a discussion of our balance.
Condition and recent financing activities.
As of September Thirtyth 2020, we had 2.7 million of cash compared to 5.5 million as of December 31st 2019.
We had no outstanding debt obligations in either period.
The change in cash during the third quarter as compared to $5.3 million.
She can thirtyth represent an average cash burn from operations of approximately 900000 per month, reflecting our continued efforts to control our expenses and allocate capital prudently.
Subsequent to quarter end on October 26, 2020, we closed a private placement, resulting in net proceeds of approximately three point.
Q2 million, which was led by Dave and myself and include participation from existing and new shareholders.
We believe the proceeds raised from this transaction along with existing cash will be sufficient to fund our operations throughout most of the first quarter of 2021.
Looking ahead well can.
Continued to maintain a disciplined approach to spending well evaluating multiple options to secure additional capital to strengthen our balance sheet and support our operation.
Turning to our 2020 guidance.
Given the uncertainties associated with the COVID-19 pandemic, we're not providing any updated financial outlook.
Look for the full year 2020 at this time.
Like many companies in the medical device industry. We're currently not able to estimate the duration and impact that could have a 19 on our operations and financial results at this time.
With that I'll turn the call back to Dana Thanks.
Thank you Joyce.
Steph.
Ambac I couldn't be more proud of our team's ability to rise above the challenges presented by co that and continue to drive strong progress on our regulatory and commercial initiatives, while the near term environment is likely to remain challenging heelys has committed to operating as efficiently as possible and drew.
Stephanie continued progress on our key growth initiatives working towards obtaining regulatory clearance in the us and facilitating the commercial adoption of our ponds treatment in Canada.
Success in Prince pursuing these two key initiatives would position.
Joining us to bring our ponds treatment to the large underserved population of Ns.
Patients in the us in Canada, which we believe represents the best path to creating value for our shareholders.
Longer term, we look forward to leveraging the potential of our ponds device as a platform.
Technology and continue our important work on the last frontier healthcare by expanding its existing indications for use pursuing new indications in stroke, and cerebral palsy and explore new potential applications, including applications in wellness cognitive development and human performance.
Before we open up the call for questions I would like to thank our existing and new shareholders, including those that participate in our October private placement. We appreciate your confidence and support as we reposition heelys for our next phase of growth to create shareholder value I'd also like to thank our employees for their hard work.
Continued dedication to our mission, our customers and existing shareholders and everyone on tonight's call for their interest in Helios medical technology with that operator, let's now open the call up for questions.
Thank you.
If you would like to ask a question please signal by pressing star.
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We do ask that you limit yourself to one question and one follow up.
If you would like to ask additional questions. We invite you to add yourself to the queue again.
By pressing star one.
We will now take a moment to allow participants to join the queue.
Yeah.
Okay.
Okay.
Okay.
Once again, if you would like to ask a question. Please press star one on your telephone keypad.
Our first question today is from Mary Peroni, a private Investor. Please proceed with your question.
Hi, Thank you.
Tom Hughes or myself as well as a shareholder I'm wondering why you havent consider.
Considered Parkinson's and.
The ponds for Parkinson's.
Hello.
George do you want to take that please.
Sure Yeah, so where we're working through but as we've seen you know there's a lot of potential with advanced device on and Parkinson's is certainly on the list of those items that are under consideration going forward.
We're tending to focus right now.
The indications that we named are the ones that we have a lot of current data on from a treatment that that we have and the scientific research thats been done historically, but that you know certainly that is something that we will continue to put on the list and hopefully at some point in time, we won't have to approach every.
The single.
Every single disease state separately, rather we would be able to get a broader indication across multiple disease state, but that that would be something that we could look like in the future.
Great.
Thank you.
Okay.
Once again, if you would like to ask a question. Please press star one on your telephone keypad.
Yes.
We are currently showing no additional participants in the queue.
That does conclude our conference call for today. Thank you for your participation.
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